Nov. 09 (Bloomberg) — China’s Dagong Global Credit Rating Co. reduced its credit rating for the U.S. to A+ from AA, citing a deteriorating intent and ability to repay debt obligations after the Federal Reserve announced more monetary easing.
The credit outlook for the U.S. is “negative,” as the Fed’s plan to buy government debt will erode the value of the dollar and “entirely encroaches” on the interests of creditors, analysts at Dagong, one of China’s five official ratings companies, said in a statement. The U.S. is rated Aaa and AAA by Moody’s Investors Service and Standard Poor’s Corp., the highest credit ratings of the New York-based companies.
The downgrade came before a meeting of Group of 20 leaders this week in Seoul and as the U.S. steps up pressure for China to let the yuan strengthen to help reduce the U.S. trade deficit. China countered the criticism by saying U.S. economic policies threaten the stability of developing nations.
“The general market perception is that there’s a risk that the Chinese rating agency is playing a bit more political game than providing independent analysis,” said Ian Lyngen, a government bond strategist in Stamford, Connecticut, at CRT Capital Group LLC, in a telephone interview. “I don’t think it has the same ramification as a downgrade by mainstream rating agencies such as S&P and Moody’s. That said, the reasons that the credit rating of the U.S. may come under pressure are obvious to most people.”
‘Serious Defects’
Yields on benchmark 10-year U.S. Treasury notes rose eight basis points, or 0.08 percentage point to 2.63 percent as the U.S. sold $24 billion of the securities.
The downgrade for the U.S. “reflects its deteriorating debt repayment capability and drastic decline of the government’s intention of debt repayment,” analysts Lu Sinan and Du Mingyan wrote in the statement. “The serious defects in the U.S. economic development and management model will lead to the long-term recession of its national economy, fundamentally lowering the national solvency.”
Chinese central bank adviser Xia Bin said Nov. 4 that the Fed’s $600 billion of planned Treasury debt purchases is “uncontrolled” money printing, and Vice Finance Minister Zhu Guangyao said yesterday that the program could “shock” emerging markets by flooding them with capital.
“Many countries are worried about the impact of the policy on their economies,” Vice Foreign Minister Cui Tiankai said at a press briefing in Beijing Nov. 5. “It would be appropriate for someone to step forward and give us an explanation, otherwise international confidence in the recovery and growth of the global economy might be hurt.”
SEC Application
Dagong, seeking to become an alternative to S&P, Moody’s and Fitch Ratings, ranks China’s debt higher than that of the U.S. and Japan, citing widening deficits in the developed world. Global ratings methodology is “irrational,” Dagong Chairman Guan Jianzhong said in July, and “cannot truly reflect repayment ability.”
In September, the Securities and Exchange Commission denied the application of Dagong to become a Nationally Recognized Statistical Rating Organization in the U.S.
By Joshua Fellman and Ye Xie
Nov 9, 2010 7:38 PM GMT+0100
Source: Bloomberg
Even the A+ rating is still a big joke:
– China Says Fed Quantitative Easing May Flood World Economy With ‘Hot Money’
– 14 Pieces Of Bad Economic News That Are So Horrifying You Might Not Want To Read Them Standing Up
– Catherine Austin Fitts: The Looting Of America
– America – The End of Liberty (Documentary)
– QE2 – The Day After: Entire World Blasts Deranged Madman Bernanke’s Uncheckable Insanity
– Federal Reserve To Spend $600 Billion More To Destroy The US Dollar And The Middle Class
– US Debt Has Increased $5 Trillion Since Speaker Pelosi Vowed, ‘No New Deficit Spending’
– Prof. Kotlikoff: ‘The US is bankrupt’, Government Debt At $200 Trillion – 840 Percent of Current GDP
– The Dylan Ratigan Show with Prof. William Black: ‘Fire Holder, Fire Geithner, Fire Bernanke’
– Elite Puppet President Obama Exposed (The video exposes also several other puppet administrations.)
– Three Horrifying Facts About the US Debt ‘Situation’:
#3: The US will Default on its Debt
… either that or experience hyperinflation. There is simply no other option. We can NEVER pay off our debts. To do so would require every US family to pay $31,000 a year for 75 years.
Bear in mind, I’m completely ignoring the debt we took on with the nationalization of Fannie and Freddie, AIG, and the slew of other garbage we nationalized or shifted onto the Fed’s balance sheet. And yet we’re STILL talking about every US family making $31,000 in debt payments per year for 75 years to pay off our national debt.
Obviously that ain’t going to happen.